Japanese equities: Topix to benefit from solid growth and weaker yen

While achieving a respectable total return of 11.8% yearto-date (ytd), the Topix index has underperformed global indices so far in 2017 (MSCI World +15.8%, S&P 500 +13.7%).

Focal Point 29/09/2017

Authors: Michele Morganti, Christoph Siepmann

Earlier this year, geopolitical risks and a temporarily stronger yen weighed on the Topix’s relative performance. Of late, however, the index gained again markedly on domestic as well as international grounds.
Domestically, we expect current political worries to settle again with “Abenomics” and the current monetary policy stance to remain in place. Decent growth should help Japanese earnings to improve further.
Japanese monetary policy will remain loose; against this backdrop rising US yields will weigh on the yen thereby pushing the export-oriented Topix.
Acknowledging the risk of setbacks in case of sudden changes in the global risk appetite, we expect the Topix to outperform, especially the S&P 500 index in hedged terms, as valuations remain affordable and earnings susceptible to positive revisions. We anticipate moderately positive absolute returns (around +5%) over the next 12 months.

Read the full publication below.

Focal Point

Japanese equities: Topix to benefit from solid growth and weaker yen

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